The dollar auction with spiteful players

Abstract

The dollar auction is an auction model used to analyse the dynamics of conflict escalation. In this paper, we analyse the course of an auction when participating players are spiteful, i.e., they are motivated not only by their own profit, but also by the desire to hurt the opponent. We investigate this model for the complete information setting, both for the standard scenario and for the situation where auction starts with nonzero bids. Our results give us insight into the possible effects of meanness onto conflict escalation.